Hong Kong’s Financial Risk Assessment shows that Cryptocurrency is not a major player

The Hong Kong Financial Service and Treasury Bureau (FSTB), has recently published a 132-page report on its financial risk assessment on money laundering and terrorism financing. The report was published following increased concern that the city is not doing enough to curb financial crimes. In Hong Kong, the rate of financial vices perpetuated in the past six years has increased by four hundred percent.

More so, businesses in and around the city have been protesting about the denial of banking services as a result of banks superfluous fear of money laundering. The report reveals that this has negatively impacted the cryptocurrency industry in Hong Kong. Other areas touched by the report include the risks associated with cryptocurrency and the fact that there is currently no specific regulation existing for trading on the “virtual currency.”

As it concerns money laundering and terrorist financing with cryptocurrency, the Hong Kong Police Force (HKPF) declared that according to their findings, “no apparent sign of organized crime or ML/TF concerning the trading of cryptocurrencies,” although they have been used in several fraudulent Ponzi schemes.

Additionally, the report revealed, some tokens may be considered as securities while others may be “Stored Value Facilities,” just like Paypal or Alipay. The report also reiterated Hong Kong’s government position on having no capital control on trade and also committed to being “one of the world’s freest economies.”

In the foreword of the document, the Financial Secretary of The Hong Kong Financial Service and Treasury (FSTB) Paul Chan denoted that “Hong Kong is committed to combating ML and TF together with the international community.” He added that, “Over the years we have put in place a robust anti-money laundering and counter-financing of terrorism (“AML/CFT”) regime having regard to international standards set by the Financial Action Task Force.”

In most jurisdictions, there is no specific laws or regulations covering cryptocurrency such as Bitcoins, they are usually regarded as virtual commodities but no as an official legal tender in Hong Kong. Most transactions involving cryptocurrency the report added, are mostly “bilateral contractual arrangements between service vendors and users for bartering specific goods or services.” Hence, they are subjected to speculation and price fluctuation. The report also noted that since these virtual currencies are not backed by actual physical assets, the issuer or the real economy and investors or consumers may suffer significant monetary losses as a result of the volatile prices.

The report is coming after the Hong Kong’s financial regulatory body is taking a tougher stand against Initial Coin Offerings in the Country. Julia Leung deputy head of the Hong Kong Securities and Future Commission (SFC) suggested during her speech at an event hosted by the Hong Kong Investment Funds Association that the general public should be wary of ICOs and other cryptocurrency related activities.

Salomon Sunny is the market reporter for Smartereum, one of the global leaders in Ethereum, blockchain and currency news. He produces technical price updates on digital currencies and writes recent developments about blockchain.